Fear and greed in a clue

Schalk Louw is a portfolio manager at PSG Wealth.

Warren Buffett remains one of the most famous investors, so it’s no coincidence that his words are just as famous. One of my favorite Buffett sayings has to do with two emotions in the investment world: “Two super contagious diseases, fear and greed, will happen forever in the investment community. The timing of these epidemics will be unpredictable… We just try to be afraid when others are greedy and only be afraid when others are afraid.

The genius Albert Einstein once said that compound interest is the eighth wonder of the world. “Whoever understands it wins … whoever does not understand it … pays it.” Now, I would never dare to disagree with a man of his caliber, but I would like to add that if compound interest is the eighth wonder of the world, then the “herd effect” must be the ninth. The herd effect is undoubtedly one of the most powerful forces, not only when it comes to consumer goods, but even stronger when it comes to investments.

I have been following this index for quite some time and have found that in addition to the fact that many short term indicators use this index, it gives us a good indication of the emotional state of the US markets. I did some research on the methodology of this index and decided to apply it to the South African investment market as much as possible. The results were quite surprising.

Subscribe to News24 for just R75 per month to read all of our investigative and in-depth journalism. You can cancel at any time.

Comments are closed.